Officials talk shale boom highlights, lowlights

Published 4:23 pm, Saturday, November 1, 2014

Standing water reflects the sunset behind a pumpjack near the intersection of S County Rd 1130 and Interstate 20 on Wednesday. James Durbin/Reporter-Telegram

Standing water reflects the sunset behind a pumpjack near the intersection of S County Rd 1130 and Interstate 20 on Wednesday. James Durbin/Reporter-Telegram

Officials talk shale boom highlights, lowlights

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AUSTIN — Though nothing new was uttered at the daylong Texas Tribune shale boom symposium on Friday, it reinforced how the economic stimulation and job creation from shale drilling has also brought along a slew of infrastructure problems and environmental concerns.

The symposium brought out representatives from the Eagle Ford Shale and the Permian Basin, including Midland Mayor Jerry Morales and Permian Basin Petroleum Association President Ben Shepperd. The panels went through the economic impact of oil, the dynamics of the industry practices, infrastructure problems and industry sustainability.

The transformation of the Texas economy

Morales participated in the first panel, surprising attendees with the facts most Midlanders already know regarding the city’s low unemployment rate, staff shortages at restaurants and economic struggles that non-oil families have to contend with.

“One, you say it’s great for the economy, we have workers, but at the same time ... industries talk about not being able to keep up with these high wages and overtime,” Morales said.

Morales was joined by San Antonio Mayor Ivy Taylor, Karnes City City Manager Don Tymrak and University of Texas at San Antonio Research Director for the Institute for Economic Development Thomas Tunstall. Each gave different perspectives on boomtown economics and its impact on small and large cities.

Karnes City, with a population of about 3,000, has felt even more drastic effects from the boom compared to Midland. Tymrak, when talking about how revitalizing downtown created a parking problem, said the city “trades one problem for another.” Another drawback of the boom for the small town is how the school district went from receiving money from the state to having to give money to the state in a single year because of the rise in property values.

Taylor’s message was that of poverty among minorities and uneducated residents despite the new job opportunities arising from Eagle Ford activity.

“We have a large population here that are poor and don’t have the skill sets to compete with many of the jobs in today’s economy and it’s an issue we’ve dealt with for a long time here,” Taylor said.

The changing state of energy

The panel that included Shepperd went over the oil and gas industry’s rapid evolution within the past five years in both major drilling areas in Texas. When asked to contrast Permian Basin activity from the 1980s to now, Shepperd said technology is the driver.

“Being able to identify where the hydrocarbons are, being able to identify how to capture them and get them out of the ground in a responsible way, technology has evolved,” Shepperd said.

To compare both eras though, Shepperd said there is still risk involved in production because of the high cost of investment, though that risk has minimized.

And to compare the Permian Basin with the Eagle Ford, Shepperd said there is a difference in the thickness of the areas. He said the Permian Basin can be drillled down to 3,000 feet deep, while Eagle Ford is about 300 feet deep.

On the changing use of water after the state drought began in 2011, Shepperd said the industry has recognized the need to preserve the resource and recycling efforts are being made, adding that a half-dozen companies recycle 80 to 90 percent of its used water.

“Five years ago that number was zero,” Shepperd said.

Education and health care

Midland ISD and United ISD’s petroleum academies were brought up during this panel discussion that examined the link between the oilfield’s workforce and its educational foundation. State Sen. Judith Zaffirini of Laredo said the academy offers students a pathway to higher education while being work-ready immediately after high school.

“What we are trying to ensure is that these students plan a career, not simply prepare for a job, because there’s focus on workforce,” Zaffirini said. “And it’s important that schools and colleges align their courses with the industry, but at the same time we want the students to think higher, not thinking simply to get a job, but to think of being entrepreneurs.”

To help fund the state education system, state Rep. Mike Villarreal of San Antonio challenged conservative rainy day fund estimates and usage, saying that the fund is at $11 billion rather than $8 billion.

“We had gotten away from using this extra money to stabilize our large economy and invest broadly,” Villarreal said. “We’re about to vote on a constitutional amendment, which is needed, but it’s an example of very narrow thinking, where $1.7 billion will be taken away from the flow of the rainy day fund and invested into transportation infrastructure, which we all agree is needed. ... But that’s not the only investment in infrastructure that should take place. Healthcare, hiring, education: All these areas are being impacted in and around the Eagle Ford Shale.”

Villarreal added that funding, or the lack of it, shouldn’t be a political ideology, but rather “the human problems that are being experienced.”

How to keep the boom booming

The $20 dip in the oil price was brought up in the fourth panel, featuring state Rep. Jim Keffer and Railroad Commissioner Barry Smitherman.

Smitherman said he was concerned with the volatility of the price. He referenced the Wall Street Journal when saying the Permian Basin and Eagle Ford will continue to be profitable at this time until the price continues to plummet in the $50 per barrel range.

“I think it depends on company by company cost structures,” Smitherman said. “If you’re a company that has investment in places ... where you need $90 oil to be profitable, you may be thinking about what you’re gonna do moving forward.”

Smitherman said he was also interested in the price of natural gas. He predicts natural gas usage will increase.

“There’s room for caution for liquids, but there’s room for optimism on natural gas,” Smitherman said.

Keffer, of Eastland, contributed the Permian Basin’s sustainability to global positioning. He said the world is not ready for the Basin to be a big player in the industry yet, adding that the Basin can change cultural and political boundaries.

On the price of oil, Keffer said that the independent companies in both Permian Basin and Eagle Ford are capable of operating even at the $50 per barrel price point.